HR must get to grips with cultural differences if offshore outsourcing is to succeed.

The offshoring market is growing and becoming more sophisticated, going beyond computer programming or help-desk support and moving into complex IT-enabled services, such as research, design, accounting and, yes, HR services. This, in turn, is creating a demand for a new breed of HR manager – one who understands cultural differences and is adept at managing outsourcing relationships.

Evalueserve is a young and fast-growing Indian research company that estimates the global offshore market for high-value services – such as HR – will be worth £28.2bn by 2010.

The company recently published a detailed analysis of how offshoring will affect the UK economy. It predicts that, if present economic growth levels are sustained over the same period, there will be a shortfall of at least 714,000 workers in the UK economy – with a large shortfall in the IT and healthcare sectors.

The implication of this analysis is that we can increase offshoring and immigration, or just ignore the issue and lose out as companies go elsewhere for their knowledge workers.

Yet there are some new opportunities being created by this outsourcing revolution. During the sales process, every HR services vendor will highlight their capabilities to the management team of the potential customer. This will involve the two management teams working side by side, possibly with some experienced outsourcing consultants overseeing the selection process. However, when the handshake is concluded and the two companies start working together, managing their relationship on a day-to-day basis becomes one of the critical details that can make the difference between success and failure.

Unfortunately, these relationship management skills differ greatly from those on offer in many in-house payroll or HR teams. In many cases, problems have been created in outsourcing agreements by allowing existing in-house managers to manage the vendor relationship without any additional training in the skills required for this. Great opportunities exist for managers who are capable of crossing the soft-skills bridge to relationship management. These are the roles of the future, as in-house HR enters a period of terminal decline in large organisations.

Cultural awareness will also help a manager to get the best from a team located in a far-flung offshore location. Your organisation may offer orientation training for managers who need to travel often or who manage offshore teams. Or you may want to consider a sabbatical with one of the many companies looking for foreign managers to help them with their own cultural alignment.

MphasiS is an example of a company running such a programme. It is a large Indian business process outsourcing firm, based in Bangalore, servicing the customers of leading European and US financial services organisations.

MphasiS runs a programme called REACH – Reaching Across Cultural Horizons – which encourages foreign nationals to spend at least three months working with its staff, training them in idiomatic expressions and other cultural nuances so they can improve their customer service to countries such as the UK. MphasiS offers travel, accommodation and a small stipend in return, though the more obvious benefit for a UK manager spending time on this programme is the appreciation of how best to work with a team in India.

Offshore outsourcing is not about to cause the jobs stampede feared by trade unions, but will be a subtle change in skills required by large organisations, including the HR department itself. Prepare for an outsourced future now.

Mark Kobayashi-Hillary is the author of Outsourcing to India: The Offshore Advantage (Springer Verlag 2004)

Learning points for HR

Training in cultural awareness and communication should be considered for those who need to manage or work with cross-cultural teams

Group loyalty is important in India, whether it is to a company, family or trade. Individual eccentricity is rare

The UK has many cultural connections with India and this can be a comfort to British managers visiting India. However, the shared cultural reference points do not automatically lead to perfect communication and understanding

Hierarchy is important to Indian managers. The concept of ‘face’ restricts subordinates from correcting their boss and you may often witness managers ‘sending a stinker’ to their subordinates, reinforcing their position of authority

Indians love business negotiation, but they are offended by arrogance and conceit – especially if conducted in the condescending manner of an ex-colonial. If you conduct a gentle bargaining process with patience, and avoid the constant Asian fear of losing face, you will succeed, but always be wary of any promise that is too good to be true. It always is.